(Mark Pennington)
Spontaneous order theory does not discuss the motivation behind people’s actions. Nor does it assume self-interest.
The reality is, people are motivated by self-interest.
Central does not fail because it doesn’t motivate people. It fails mainly because the planners have cognitive limitations.
Adam Smith argued that self interest will produce public good via the invisible hand only if the correct institutions exist and function. Otherwise, self-interest will bring public bad.
Public good is not an automatic outcome of self-interested actions by free-marketers. It requires the existence of certain institutions.
Proponents of public choice theory believe that government interventions in market activities are unnecessary.
Government intervention is often defended with reference to market failures arising from externalities, imperfect information and monopoly of power.
Public choice theory suggests that government intervention would only bring about more serious institutional failings, not correct them.
The market is much quicker to punish or exclude wrong doers than governmental bureaucracies. Enron is a good example. It took only two weeks for the market to completely demolish Enron. It may well take much longer if the public opted for political interference.
The political process does not provide enough dynamics to allow change and proper accountability. The market is much better at this.
Politics is the art of getting others to pay for what you want. Politicians can force you to pay for something that you do not need.
The market is about asking you to pay only for the things that you need. No one is forcing you to pay for anything. It is voluntary.
Thus, the powers of the state and its political actors must be limited and the market must be allowed to take its course.
Filed under: Freedom & Liberty
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